You cannot pay Medicare Supplement premiums from an HSA on a tax-free basis. Federal law lists the insurance premiums that qualify for tax-free HSA distributions after age 65 and specifically carves out Medigap. The statute allows HSA money to cover “any health insurance other than a medicare supplemental policy,” and the IRS repeats the exclusion in Publication 969.1Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans The exclusion applies to every standardized Medigap letter plan, and it applies whether the policy is yours or your spouse’s.
Medigap policies cover copayments, deductibles, and coinsurance gaps in Original Medicare Parts A and B, and they’re sold by private insurers rather than run by the federal government.3Medicare.gov. What’s Medicare Supplement Insurance (Medigap)? Congress drew the line between government-administered Medicare premiums and the private supplemental coverage that wraps around them. Medigap also doesn’t slip in through any other HSA premium exception: it isn’t COBRA continuation coverage, isn’t qualified long-term care insurance, and has no tie to unemployment benefits.
What Happens If You Pay Medigap From Your HSA Anyway
Using HSA funds for a Medigap premium isn’t illegal, but the withdrawal loses its tax-free status. The amount comes into your gross income for the year as a nonqualified distribution. If you’re 65 or older, income tax on the distribution is the only consequence. If you’re under 65, which can happen for a disabled Medicare beneficiary, you also owe a 20% additional tax on top of the regular income tax.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
Returning a Mistaken Distribution
If you already paid a Medigap premium out of your HSA by mistake, you may be able to undo it. The IRS lets you return a mistaken distribution to the account if the withdrawal happened because of a “mistake of fact due to reasonable cause.” You have until the tax filing deadline (without extensions) for the first year you knew or should have known about the error. A timely repayment isn’t included in gross income, isn’t hit with the 20% additional tax, and doesn’t count as an excess contribution.4Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA
Your HSA custodian isn’t required to accept the repayment, so ask before sending money back. If the custodian accepts it and had already issued a Form 1099-SA for the original distribution, they’ll need to file a corrected form.
Which Medicare Premiums Your HSA Can Cover Tax-Free
Once you turn 65, HSA distributions can pay a specific set of Medicare-related premiums tax-free:
- Medicare Part A premiums, if you owe any (most people qualify for premium-free Part A).
- Medicare Part B premiums. The standard Part B premium is $202.90 per month in 2026.5Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
- Medicare Part D prescription drug premiums. The 2026 national base premium is $38.99 per month.6Medicare.gov. 2026 Medicare Costs
- Medicare Advantage (Part C) premiums, though only the portion covering medical care counts. If your plan bundles non-medical perks such as gym memberships, that portion doesn’t qualify.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
Notice the pattern. Every premium on this list goes to a program the federal government administers. Medigap, which is private insurance sold to fill gaps in that government coverage, sits outside the list on purpose.
The Reimbursement Workaround
You can’t pay Medigap tax-free from your HSA, but you can free up cash to pay it from another account by reimbursing yourself for qualified expenses you paid out of pocket in the past. HSAs have no deadline for reimbursement. If you paid a qualified medical expense in 2024 out of your checking account and kept the receipt, you can withdraw that same amount from your HSA tax-free years later, as long as the expense was incurred after you opened the HSA.
That opens a legitimate path around the Medigap problem. Pay the Medigap premium from your regular checking account. Then reimburse yourself from the HSA for older qualified expenses you’ve been carrying: medical bills, dental work, prescriptions, hearing aids, eyeglasses, Part B premiums, and similar costs. The Medigap premium itself never touches HSA money, so it never becomes a nonqualified distribution. The reimbursement covers different expenses that do qualify.
What the strategy demands is recordkeeping. Save every receipt for qualified medical expenses paid out of pocket. Note the date, the provider, and the amount. When you want to pull cash from the HSA to cover a Medigap premium in your budget, match the withdrawal to receipts you already have on file. The IRS doesn’t automatically know what your HSA distributions paid for, so the receipts are what stand between you and a tax bill if the withdrawal is ever questioned.
Spousal Medigap Premiums
The Medigap exclusion follows the coverage, not the person. You cannot pay your spouse’s Medigap premiums tax-free from your HSA regardless of either person’s age.2Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans Your spouse’s Part A, Part B, Part D, and Medicare Advantage premiums can be paid tax-free from your HSA, but only if you (the account holder) are 65 or older. If you’re still under 65, your spouse’s Medicare premiums generally don’t qualify as tax-free HSA distributions, even when the spouse is enrolled in Medicare.